In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change: Ending Inventory LIFO FIFO Cumulative Difference 12/31/2018 $240,500 $275,300 $34,800 12/31/2019 246,400 306,200 59,800 12/31/2020 254,400 326,200 71,800 Frost reported net income of $2,584,500, $2,313,500, and $2,033,500 in 2018, 2019, and 2020, respectively. The tax rate is 35%. Required: 1. Prepare the journal entry necessary to record the change. 2. What amount of net income would Frost report in 2018, 2019, and 2020?
In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change: Ending Inventory LIFO FIFO Cumulative Difference 12/31/2018 $240,500 $275,300 $34,800 12/31/2019 246,400 306,200 59,800 12/31/2020 254,400 326,200 71,800 Frost reported net income of $2,584,500, $2,313,500, and $2,033,500 in 2018, 2019, and 2020, respectively. The tax rate is 35%. Required: 1. Prepare the journal entry necessary to record the change. 2. What amount of net income would Frost report in 2018, 2019, and 2020?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change:
|
Ending Inventory
|
LIFO
|
FIFO
|
Cumulative Difference
|
| 12/31/2018 | $240,500 | $275,300 | $34,800 |
| 12/31/2019 | 246,400 | 306,200 | 59,800 |
| 12/31/2020 | 254,400 | 326,200 | 71,800 |
Frost reported net income of $2,584,500, $2,313,500, and $2,033,500 in 2018, 2019, and 2020, respectively. The tax rate is 35%.
Required:
| 1. | Prepare the |
| 2. | What amount of net income would Frost report in 2018, 2019, and 2020? |
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education